Politicians failing on housebuilding, say industry bosses in merger
THE biggest property developer in Britain has urged politicians tackle the housebuilding crisis as it unveiled a £2.5bn takeover of a rival.
Barratt Developments, the country’s largest housebuilder, announced plans to buy competitor Redrow in a deal that will allow the combined company to build around 22,000 homes each year.
David Thomas, chief executive of Barratt, warned that the UK is not building enough properties to meet demand.
He welcomed Labour and Conservative promises to respond to the problem but said there was cross-party acceptance that not enough was being done.
Asked if he was concerned that politicians were doing too little to deal with the crisis, Mr Thomas said: “Clearly, as a country, we are j ust not building enough houses. I mean, that is the beginning and the end of it.
“I don’t think that either of the political parties believe that we are building enough houses. And if you look at what they’re saying, they are expecting more houses to be built.”
It came as Barratt revealed profits of £157m for the last six months of 2023, down 70pc on a year earlier. The number of homes built by the business dropped 28pc to 6,171.
Meanwhile, Redrow reported a 27pc plunge in revenue to £756m over the same period. The Government has set a target for 300,000 new homes to be built each year but this has repeatedly been missed. Completions fell by 8pc to 231,000 in 2023.
Planning red tape has been criticised for holding back developments and empowering so-called Nimbies who are against new estates. According to the Home Builders Federation trade body, up t o 145,000 houses have been blocked by so-called nutrient neutrality rules, which are meant to prevent environmental pollution but have been criticised as too stringent.
The industry has also been hit hard by higher interest rates – particularly Barratt, whose main first-time buyer market has felt the resulting mortgage increases particularly keenly.
Barratt’s merger with Redrow will allow the two companies to limit the impact of higher rates by building a wider range of houses on plots that they jointly own. Redrow properties are typically aimed at wealthier buyers moving up the ladder, and the aim is to mix these with Barratt’s cheaper houses.
David Thomas, Barratt’s chief executive, and Matthew Pratt, the boss of Redrow, said the deal came about as the businesses sought to weather the housing downturn and “accelerate the delivery of the homes this country needs”.
The takeover will lead to a new combined group called Barratt Redrow, delivering annual cost savings of around £90m. Once the deal is complete, Redrow will hold approximately 32.8pc of the merged business and Barratt will have approximately 67.2pc.
Barratt’s share price fell 7pc after the merger was announced, while Redrow’s climbed by 13.8pc. Redrow is around a third of the size of Barratt, and the spike in its shares reflects the 27pc premium offered to them under the terms of the all-share deal.
Steve Morgan, the founder of Redrow and its largest shareholder with a 16pc stake, said: “Barratt is a homebuilder I have long admired due to their likeminded attention to quality. I am confident that the Barratt-Red row combination will create a standout homebuilder for the future.”
The deal comes as British housebuilders recover from the worst downturn since the financial crisis as high property prices and mortgage rates triggered a slump in sales last year.